Numerous members of the Indian crypto community hoped that the high crypto tax, which went into effect in March 2022, would be reduced.
Within 10 days of the new tax policy, trading volume on major cryptocurrency exchanges in India dropped by 70%, and by nearly 90% within three months.
Cryptocurrency and blockchain technology received no mention in India's union budget for 2023, dashed the hopes of millions of crypto holders in the country. Many in the Indian crypto community were hoping for a reduction in the high crypto tax, which was implemented in March 2022.
On February 1, Indian Finance Minister Nirmala Sitharaman presented the Union Budget, announcing significant changes to income tax slabs. During the session, however, the minister made no mention of crypto, central bank digital currency, or blockchain technology. Last year, India imposed a 30% tax on cryptocurrency profits and a 1% tax deducted at source (TDS) on all cryptocurrency transactions, effectively derailing a thriving industry.
The primary reason for imposing a TDS on all cryptocurrency transactions was to verify the total number of Indian citizens who actively use cryptocurrencies. From May 2023, the government will have access to this information as Indians file income tax returns.
Trading volume on major cryptocurrency exchanges in India fell by 70% within 10 days of the new tax policy, and by nearly 90% within three months. The strict tax policy drove cryptocurrency traders to offshore exchanges and forced new crypto projects to relocate outside of India.
Former Indian Finance Secretary Subhash Chandra Garg previously stated that crypto taxes require much more clarification. Chandra predicted that there would be no new changes in the upcoming Budget 2023. As Chairman of the Committee that drafted the pioneering Crypto Bill, Chandra has a unique insight into the future of the economy.
Pushpendra Singh, a blockchain influencer and tech entrepreneur, believes the government is still waiting for the report from the committee it formed earlier and stated:
The Finance Minister has yet to make any announcements regarding cryptocurrency taxation, as the government is awaiting the committee reports, to the best of my understanding. However, the anticipation of the reports has been mounting, as the crypto industry continues to grow and evolve.
According to Sathvik Vishwanath, co-founder and CEO of Indian exchange Unocoin, new income tax laws for cryptocurrency were implemented only 10 months ago. Furthermore, TDS is only in effect for seven months, so the government requires more time. He elaborated:
"For an extended period of approximately one to two financial years, the Indian government has been collecting data to analyze and make any necessary changes. As a result, no major developments in the crypto industry were expected. However, we can anticipate some changes in the near future or during the upcoming budget.”
Another reason for the absence of crypto in the union budget could be India's emphasis on a global approach to crypto regulations, particularly a common taxonomy. In July 2022, the finance minister sought international collaboration from G20 members to establish a global standard for crypto.
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